SWIFT, world’s largest electronic payment system, this weekend severed 30 Iranian banks that have been blacklisted by the EU under the economic sanctions programme. SWIFT says the ‘extraordinary’ and ‘unprecedented’ move will have a deep impact on the Islamic Republic’s ability to carry out financial transactions with the rest of the world.
Local economists agree that cutting off links of Iranian banks with the outside world could cripple the already troubled economy.
On Saturday, 19 banks and 25 financial institutions from Iran, some of which accused by the US of financing Iran’s nuclear programme, were blocked from using SWIFT, the financial messaging system which links more than 9,700 banking organisations, securities institutions and corporate customers in 209 countries. In 2010, the now-blocked Iranian banks and institutes made over 2 million cross-border payments using SWIFT.
“It is the killing point in the lifeline of Iran’s economy,” said Dr Abdul Razzaq Al Fares, Chief Economist and CEO of Research at the Dubai Economic Council.
“The SWIFT move will not only strangle overseas Iranian businesses but will make the life of Iranians more difficult,” he said. “It will affect remittances from the UAE as most of the exchange companies can’t conduct even personal transactions to Iran.”
Israeli Finance Minister Yuval Steinitz welcomed SWIFT’s decision to bar Iran from using its electronic fund transfer system to make international transfers. “This constitutes a tremendous blow that could potentially lead to the collapse of the Iranian economy,” the Israeli official said in his statement.
Stoicism amid hardships
One Dubai economist, on condition of anonymity, said the SWIFT ban won’t stop Tehran from finding alternative ways to conduct its business with the rest of the world.
“Cutting off formal fin-ancial channels does not necessarily spell an end to ways money can be transferred between willing partners,” the unnamed source said while emphasising that Iran has proven to be resilient in bypassing sanctions largely because it still has key economic partners like Russia, China, India, Malaysia and Turkey to work with. “These nations have not shown any signs of joining the West’s sanctions yet.”
Al Fares agreed Iran could find a way around the ban, but to do so would be “very costly, unsecured and very complicated.”
Meanwhile, Iran responded to the SWIFT sanctions, characterizing them as unnecessary since Iran maintains that it has no desire to build a nuclear bomb. “I think they know pretty well, I think the United States intelligence services and the West know that we are not after building nuclear weapons,” said Mohammad Javad Larijani, Secretary General of Iran’s High Council on Human Rights.
Innocent people to suffer
Iranian traders in the UAE insist they have suffered a 40% decline in transactions due to the tougher economic sanctions meant to have an impact on the regime.
About 8,000 companies owned by Iranians operate in the UAE, according to the Iranian Business Council in Dubai, and deal mainly in food, tyres, electronics, raw materials, steel and iron industries.
One trader, who also wished not to be named, said he would have to shut down his business if banks were to fail.
“We already have suffered from some banks, which are freezing accounts and blacklisting Iranian companies,” he said, adding that it is already very difficult to open a bank account for a UAE-based Iranian-owned company that has business with Iran.
“This is devastating news for our businesses. I don’t know what we can do. There are no more options or windows to be opened.”